After the passage of the enabling amendments in the Insurance Act 1938, by the parliament, to hike the foreign direct investment (FDI) in the Indian insurance sector to 74 per cent from 49 per cent, the ministry of finance, on Tuesday has notified the draft rules,Indian Insurance Companies (Foreign Investment) (Amendment) Rules, 2021 , to implement the new provision.
According to the draft rules, in an Indian insurance company having foreign investment exceeding 49 per cent not less than fifty per cent. of the net profit for the financial year have to be retained in general reserve, if the insurer’s solvency margin is less than 1.2 times the control level of solvency for a financial year for which dividend is paid on equity shares.
Secondly, not less than fifty per cent. of directors of such insurers will be independent directors, unless the chairperson of its board is an independent director, in which case at least one-third of its board shall comprise of independent directors.
In an Indian insurance company having foreign investment a majority of its directors, a majority of its Key Management Persons, and at least one among the chairperson of its board, its managing director and its chief executive officer, has to be resident Indian citizens, said the draft rules.
Moreover, total foreign investment in an Indian Insurance company will mean the sum total of direct and indirect foreign investment by foreign investors in such company.
Insurers having foreign investment, existing on or before the date of commencement of the Indian Insurance Companies (Foreign Investment) (Amendment) Rules, 2021 have to comply with new provisions.
The draft rules will be taken for publication in the Gazette of India after the expiry of a period of fifteen days from the date on which they are published.
Suggestions that may be received within the said period shall be considered by the Central Government, and can be sent under secretary to the Government of India, department of financial service.